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Title: Decomposition of Changes in the Self-Employment Rate, 1950-1990: How Much is Due to Shifts in the Composition of the Labor Force?
Citation Type: Working Paper
Publication Year: 2004
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Abstract: This paper seeks to determine how much change in the U.S. self-employment rate from 1950 to 1990 is associated with changes in the composition of the labor force, particularly the employment shares of industries. Other exogenous factors considered are age, sex andrace/ethnicity composition of the labor force, as well as education levels. This question is of interest because the answer may indicate that some growth in self-employment is due to broader influences in the economy than factors that impact the attractiveness of self-employment relative to wage employment within specific industries. A simple decomposition separates changes in self-employment rates into a composition component, reflecting shifts in the composition of the labor force (or in the relative sizes of industries), and a within component, consisting of changes in self-employment rates within labor force groups or industries. Results using census data from 1970 to 2000 show that approximately 46 percent of the 2.23 percentage point growth in self-employment can be explained by faster growth of high self-employment industries than of low self-employment industries. Other exogenous labor force changes appear to have less impact on both the pre-1970 decline of self-employment as well as the post-1970 increase. Nonetheless, when age, sex, race/ethnicity and education are added to industry as labor force controls, these variables as a group explain 69% of the 2.23 percentage point resurgence of self-employment.
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Authors: Pearlman, Andrew
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Institution: Bard College
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Data Collections: IPUMS USA
Topics: Labor Force and Occupational Structure, Race and Ethnicity
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